OPmobility SE (OPM) Earnings Call Transcript & Summary

Ladies and gentleman, it's a real pleasure for me to have you here today to make the introduction to the 2019 results and introduce you the new leadership team, which I've installed at the beginning of the year with great joy. Laurent Favre and Félicie Burelle will go in deep dive and details of our results. I will make a short couple of slides introduction, hopefully. Yes, okay. Just remembering the last 20 years, we've had 7 businesses. We were involved in medical products, in traffic signing products, in trucks activities, in environment, containers activities, in playground activities and in automotive fuel cell and exterior business. We've had 7 businesses that we have discarded along the years. That has taken us from a EUR 1.6 billion company to a EUR 9.2 billion, almost sixfold in the last 20 years, and now we're pure player in the automotive field with 3 activities, Intelligent Exterior Systems, which will be described by Laurent Favre to you, Clean Energy Systems and Module HBPO that we've acquired [indiscernible] last year. Just to complete this pure play situation, we've decided last year to discard some real estate which were not linked to pure activities, which were real estate rented outside of the group, and we've sold, we've spinoff those activities to a subsidiary of Burelle SA that I am chairing called Sofiparc. And based on 2 independent evaluations, Plastic Omnium sold that. So now Plastic Omnium is a true pure player automotive company, developing its activities under the control of Burelle SA Holding. Along the last years, the Burelle Family that I represent has increased its stake in Burelle SA, but has increased its stake in Plastic Omnium directly to 58.78% plus 1% or 2% directly from the family. Let's say 60% direct control of Burelle SA to on Plastic Omnium, but the percentage of interest, multiplying the stake of Burelle Family by the stake in Plastic Omnium has passed the 50% line of control, showing our deep interest and our will to develop our business in the future and taking the opportunities of the future transition, not to say revolutions, which is going to happen in the next years. We build that high basis handover, this happy handover on a couple of ratios, net debt-to-EBITDA of 0.7%. And I think that the 0.7% -- 0.7% is including the new IFRS 16. And without, it will be 0.5% because the 0.7%, it's not final -- it's not bank debt, is a debt linked to the long-term lease of buildings. Our gearing debt to equity, 32%. We have a firm undrawn credit lines available cash of EUR 1.2 billion, plus our cash at banks [indiscernible] EUR 1.6 billion available cash instantly worldwide, which is quite reassuring in the -- today's era. But the most important is our people. And we have now a clear team. We have a Nonexecutive Chairman, myself. We have a CEO, 40 (sic) [ 48 ] years old, 23 years of experience with leading German suppliers in Germany, Laurent Favre. Some of you may have known already, but you will know in a minute. And Félicie Burelle as Managing Director, who has been in the M&A and strategy during 10 years at Plastic Omnium. You're not allowed for a lady to tell her age, but till 40 years, it's allowed to tell. She's 40 years old. And this young leadership team will do brilliantly, I'm sure, in the future with my support. I hand over to you, Laurent.

Thank you very much, Mr. Burelle, and welcome from my side as well, and good morning. I will start with some highlights of 2019, main events in 2019 concerning Plastic Omnium in the market. I'll then hand over to Adeline Mickeler, she will go into the details regarding the financial results of 2019. And then Félicie Burelle will come to talk about what we have done in terms of innovation in 2019. Innovation being a very important part of our strategy because we do intend to increase the content by car, and that's the way we want to grow. And increasing the content by car mean having more functions integrated in our parts, that means more innovation. And then I will come back to talk about another very important pillar of our strategy, our ambitious CSR policy. And then for sure, to give you some outlook concerning 2020. That's the agenda for this morning. I start with some highlights. And some highlights, first of all, what we are doing and the 3 activities. Mr. Burelle did mention before. That means, on the left side, you can see what we call Plastic Omnium Industries with the two divisions; Intelligent Exterior Systems, Clean Energy Systems. And then on the right side, the Plastic Omnium Modules with the division HBPO. And what is remarkable is in each division, we are #1 in the world. That means we are -- we have a leading position, we have a very high market share. And what is even more remarkable this last year, we were able to outperform the market in each division. That means #1, but outperforming the market in each division in 2019, again, by winning market share or by increasing the content by car. You see some numbers. On the left side, the Plastic Omnium Industries, with a turnover of round about EUR 6.9 billion last year in economic sales with a pretty high margin, 14% EBITDA and 7.2% operating margin. On the right side, the Module part with EUR 2.3 billion turnover and for sure a lower margin, because it is a different business over there, but we have a much higher ROCE. And that means we have a good balance between industry and module, and that will give us the opportunity in the year, like in 2019 to generate a high level of cash and to continue to grow. That's our fundament. Coming to some highlights of 2019 and to some numbers we are really proud of. First of all, is our performance in the market regarding the turnover, the sales, because we had a growth of 11.4% in economic sales. And you know that the market was declining again, last year by 5.8%. And we had the growth as well by more than 17% in consolidated sales. That means at constant perimeter, we're talking about outperformance of 7 points but the euro growth is a double-digit growth in a very challenging market. The EBITDA was the highest EBITDA ever for Plastic Omnium, more than EUR 1 billion EBITDA last year, which represents an increase of close to 10% compared to the previous year and the ratio of 11.8%. You have seen before, in industries, it's about 14%. Operating results, about 6% of sales. The net results are 3% of sales and very high free cash flow generations, EUR 347 million, we will come back to more details later on, on that, and we've been able to reduce our debt to EUR 739 million. If we don't consider the IFRS, I mentioned before, it's about EUR 511 million, that means close to EUR 200 million less debt in 2019 compared to 2018. That is very solid numbers, very positive growth into '19 in a pretty challenging market environment. Challenging market environment, you see the numbers, you see the number of cars produced in 2017 and in '18, with the fast deterioration of 1% we were facing. But last year, it was even worse with a 5.8%. At least, in total, the global production, we lose more than 6 million vehicles between 2017 and 2019. And at this time, everybody was planning growth and that means, we had to react, we had to adapt ourselves to the new situation. And it was in fact in all the main markets, starting with the biggest market, China with more than 3 million vehicles lost during the 2 years, '17 and '19, but also the Europe. Mainly the biggest market in Europe, Germany and North America. That means all the markets, the main markets are impacted by the market situation. And we had to face again a decrease of more than 6 million in the production of vehicle between 2017 and 2019. How we have reacted to that. It's -- everything is about first of all anticipation about agility. We have been able to flex our cost, and that means to adapt our production costs. In our facilities to the real volume situation that means to reduce them and to work on everything we can work to be more flexible like the temps, like the headcount and so on, but also to work on a fixed cost as well. And that means, it's about EUR 50 million, we were able to save on variable cost, but EUR 50 million as well in fixed cost, to adapt our structure to the new market condition which is important for the future because you know that 2020 will be, again, very challenging in terms of market development. That means we are talking about, round about EUR 200 million, EUR 50 million, it's about flexing the cost and EUR 50 million, it's about adapting your structure to the market condition and that will help us also for this year to face the market situation. And that's the way we have reacted to the market deterioration last year. We had also in 2019, a negative event impacting our results, that is our new facility in South Carolina in Greer. As you know, we have launched many factories last year. We'll come back to that later on. But we had a factory, a new one in South Carolina, dedicated to BMW with round about USD 400 million turnover, where we do produce big parts from the division, IES, for the BMW, for the E series, the 5, 6, the 7, that means high volumes, very high demand in terms of quality. And we were not able to manage the launch properly. It's a factory which is state of the art with very good technology. But at this time, we were not -- we were not having the right team in place to manage it properly. That was the reason why we had the issues in South Carolina. We've put in place an action plan in 3 steps. The first step was about stabilizing the delivery situation with our customer, meaning the right volumes and the right quality to the customer, BMW, that has been done until December last year. That means now we have a normal situation with the customer in terms of deliveries, and we don't have any penalties for example or special costs into that. The step 2 is about optimizing the production cost in our factory in Greer. That means reducing the headcount, reducing the scrap, the quality cost and so on. That is what we are doing since December last year. We have a new task force in Plastic Omnium from -- more than 10 people, supporting the local team. We have reinforced the local team as well because it has to be sustainable as well. And with this step 2, we will be able to improve the situation in Greer compared to 2019 by EUR 45 million this year. That is what we are targeting. That is what we are monitoring on the daily base for the industrial performance on a weekly basis to make sure that all the actions are in place and that we do see the impact also on the P&L. That means we are pretty confident to achieve those number of EUR 45 million. It's not enough. And that's why we are working on the step 3, which is about optimizing the footprint we have in South Carolina because we have Greer and the plant of Anderson. And we want to optimize the loading of both factories, and that is what we are working on with the team to achieve a breakeven in 2021. And that means 3 steps. The first one done. We have a stable situation there in terms of delivery performance. Step 2 is we improved the situation in Greer. And the 3, we will improve -- optimize the footprint in South Carolina. That was the Greer highlight or lowlight of 2019. In 2019, beside Greer, we did open as well 5 new factories on top of Greer. That means we are continuing to invest, to develop our footprint to follow our customers. You can see the factories here, new factories in new countries for us like in Morocco, for example, for PSA, but also in India, in Slovakia. And for HBPO in Germany where we do produce our cockpit for the new Porsche Taycan for the e-car for Porsche. And we do produce cockpit, that's also more content by car, and we sell to you as well for HBPO. That means we did continue to invest in our footprint also into '19 to follow up our customers and to prepare the future growth of Plastic Omnium with the opening of 6 new factories. Besides the footprint, in terms of production. We have also invested in our footprint in terms of R&D. And I mentioned in the beginning that one big engine of our growth for the future will be innovation to integrate more function in our parts, in our products. And that's why we have invested massively in R&D centers last year. 2 R&D centers for the Clean Energy division, Deltatech in Belgium and Omegatech in China, which are dedicated mainly to new energies and mainly to hydrogen. You know we had started to invest in hydrogen 5 years ago. We do believe that it's going to be a key for the future of the clean mobility. And that's why we have intensified our investments in those technology, both in Europe but also in Asia because the market in Asia is very important. Besides that, we have also invested in a new Sigmatech. We have a big extension of Sigmatech for IES because as well for exterior system, we do see a lot of very exciting innovation, and Félicie Burelle will show you some examples later on. That means beside the footprint, in terms of factories, we prepare also the future in terms of innovation with our investment in 3 new R&D centers in 2019. That give us this footprint. You can see on the screen that means we are global. We have 131 factories in the world. You see the spread by region. That means we do cover all the main regions in the world, which are relevant for the automotive industry. But we have also 26 R&D centers. Again, as well, not only in Europe but also in Asia and North America, South America. That means we are able really to follow our customers in terms of production, in terms of innovation and to support them in this transition to a clean and connected mobility. That is the footprint we have right now. As well a great success. I think we can be very proud of in 2019, is that we have been able to add 10 customers, 10 new customers, to our portfolio. That means, I repeat, we are market leader in our divisions. We had 83 customers last year in 2018, now we have 93 customers. That means we are able to gain new customers, which demonstrate that we are competitive, but that we have also leadership in terms of technology. Those 10 customers, these are the ones in blue. You can see on the bottom of the slide. And there are pure EV OEMs. We are part of the EV story as well. You can see that, for example, we do deliver Tesla. But now we have also new customers like Polestar, like Rivian, which will play a major role in the mobility of tomorrow. And we are part of this journey as well. And we were able to gain new customers like last year in this area. And also in China for local OEMs, local OEMs, they have more than 40% of the market share. We still have 80% of our market in China with global ones like the Volkswagen and General Motors and so on, but we want to increase our penetration in China with the local OEMs as well. And that is what were are able to do last year. That means now we have a great balance between mass market OEMs, premium OEMs, which are important for the innovation. But also the pure EV OEMs, where we can also develop our technology and the Chinese OEMs, which are playing a very important role in this big market. That means from you a very great success from the team into '19 to be able to develop our customer portfolio. After those highlights, I will hand over to Adeline. And Adeline will explain you in details our financial results and performance from 2019. Adeline?

Good morning. Following the takeover of HBPO and the disposal of Plastic Omnium Environment in 2018, 2019 represents the first full year in Plastic Omnium's new perimeter, with Plastic Omnium Industries accounting for 75% of our total sales and Plastic Omnium Modules for the remaining 25%. In that perimeter, 2019 results shows, first, a solid growth of our sales; and second, a strong free cash flow generation. Let's start with our sales. Again, 2019 was another year of strong growth at Plastic Omnium, with 11.4% growth of our economic sales and 17.2% of our consolidated sales. I remind you that the difference between economic and consolidated is the sales of the group JVs that we take at the group percentage of interest. For Plastic Omnium Industries, this is 50%. We have YFPO the Chinese leader in the exterior business. And BPO, the Turkish leader in the same business. For Plastic Omnium Modules in 2019, this is the 50% HBPO holds in Samlip, the Korean leader in the front-end module business. 2019 is a strong year in terms of growth, both external and organic. The takeover of HBPO in 2018, July 2018 contributed EUR 712 million in our economic sales and EUR 1.015 billion in our consolidated sales. So a strong external growth and an organic growth as well. Excluding the HBPO effect and at constant -- at constant exchange rate, sorry, our organic growth was plus 1% in economic and plus 1.4% in consolidated sales. As a reminder, again, the automotive production continued to decline in 2019. 5.2 million fewer cars were produced in the world in 2019. With an organic growth of 1% in our businesses, we therefore, outperformed 6.9, let's say, 7 points this automotive production. What does it mean? It means that in a challenging market, our order book and our sales are solid and resilient. Our 2 businesses drove that growth. 6 points outperformance for Plastic Omnium Industries, 11 outperformance for Plastic Omnium Modules. As Laurent Favre already explained to you, this is driven by market share gains that we continue to have in our 3 businesses and by the increase in the content per car we have, especially in 2019, with SCR -- depolluting system for diesel engine, which continued to grow 12% to reach almost EUR 500 million in sales. And an increase in content at HBPO with new modules, especially the cockpit module and the center consoles. By region, this outperformance is mainly driven by North America and China, with double-digit outperformance, as you can see here on the slide. Let's start with North America. In North America, we grew 6% in a declining 4% market. This outperformance of 10 points is the result of a strong investment program that we have made over the last 3 years in the region, where we built 5 new plants, 2 in the U.S., 3 in Mexico to supply new orders we gained at BMW Greer, at Daimler, at Chrysler and at General Motors. China. Then, China, we grew 3% in a declining market of 9%. In this country, where we generate 80% of our sales with international OEMs, we have a complete footprint of 29 plants that we progressively fulfill with the strong order book we have in the country. And Laurent Favre will come back on this country later on in the presentation. I'm sure you have a lot of questions on it. Europe. Europe, 4 points outperformance, mainly driven by Eastern Europe, thanks to the new plant we launched in Hlohovec, Slovakia for Jaguar Land Rover. And in Eastern Europe, we were also very successful in [ Hungary ], with Audi, to supply front-end modules and the new center console module. The evolution of our sales breakdown shows a significant increase of North America, increasing from the 26% we have in 2018 to 29% as you can see here. Europe contributed 53% of our sales; Asia, 16%; and South America, 2%. To better reflect this balance in our geography and the weight of Europe, I remind you that we transformed Plastic Omnium into a European company in 2019. To go deeper in those geographies, I would like just to highlight the 5 biggest countries in terms of sales at Plastic Omnium. Our first country is Germany, 16% of our sales, EUR 1.4 billion generated in Germany by Plastic Omnium; second country, U.S., EUR 1.3 billion; third, Mexico EUR 1.2 billion; fourth, and I would say probably today, only fourth, EUR 0.8 billion in China; and our fifth country is France with EUR 0.7 billion. Per car maker, 2019 shows a significant increase of our German customer from the 38% in 2018 to 41% in 2019. This is mainly thanks to the full consolidation of HBPO which makes 2/3 of its sales with German OEMs, Volkswagen, Daimler and BMW. You can also notice on this slide that our customer portfolio is very diversified. Thus, of course, diversifying the customer risk. None of our customer represents more than 10% of our sales. Our biggest customer today is PSA, with 9.2%. Ahead of Audi, BMW, Daimler, Volkswagen and GM at around 8%. Let's go now through the profitability of the businesses. Starting with the EBITDA, which was another significant achievement for Plastic Omnium in 2019. The EBITDA grew 9.4% and passed for the first time in our history, the EUR 1 billion to reach EUR 1.005 billion. This is an increase of EUR 87 million, which takes into account an additional EUR 170 million of depreciation charges. EUR 114 million of those additional depreciation charges are the consequence of the strong investment program that we have made over the last 3 years, and EUR 54 million is linked to the implementation of IFRS 16. Those depreciation charges will continue to increase in 2020 by around EUR 70 million. And after that, we will enjoy a stabilization of those amortization charges. In percentage, EBITDA amounted to 11.8%, which is made of 14%, 14% for Plastic Omnium Industries and 5.1% for our assembly business Plastic Omnium Modules. Operating results. EUR 511 million in 2019, 6% of our sales compared to EUR 610 million in 2018. Impacted, again, by the additional depreciation charges and the loss, the operational loss of Greer, partially compensated by the EUR 100 million of cost-saving program we put in place in 2019. All in all, we generated in 2019 a satisfactory end benchmark, 7.2% operating margin for Plastic Omnium Industries and a 2.4% operating margin in Plastic Omnium Modules. If we go now below, the operating results. I just wanted to remind you, again, that 2018 profit included a EUR 255 million positive impact profit from the revalorization of the 1/3 historical stake in HBPO as part of the takeover of the company in July 2018. Those EUR 255 million are part of the nonoperating income of EUR 114 million. You can see here on the slide. In 2019, the EUR 67 million nonoperating expenses that you see are mainly the consequence of the restructuring cost we put in place to face the continuous drop of the automotive production. They also include the EUR 20 million gross profit made from the disposal of the nonindustrial real estate in December 2019. Financial expenses. They represented 0.9% of our total sales in 2019 compared to 1% in 2018. The increase of EUR 8 million you see on the slide, it's just a consequence of the implementation of IFRS 16. Income tax stood at EUR 90 million compared to EUR 113 million. This is an effective tax rate in 2019 of EUR 28 million compared to 19 -- 27%, sorry, compared to 19% in 2018. In 2018, again, the exceptional realization at HBPO had no tax effect, so the rate was notably low in 2018. Finally, net result group share stood at EUR 258 million, which is a level comparable to 2018, restated from the EUR 255 million of HBPO revalorization. Let's go now to the cash flow statement, which was really one of our priorities in terms of management in a very 2019 complex environment. We want, we need to preserve, to strengthen the balance sheet and to generate significant free cash flow. That's what we did. To do so, we benefited -- here we are. To do so, we benefited, first, from an increase of the net operating cash flow of EUR 113 million to reach EUR 910 million. Then CapEx and development, which stood at EUR 512 million, 6% of our sales as announced. As Laurent Favre already mentioned, we have been through a strong investment program over '17, '18 and the third semester of '19. We invested over that period EUR 1.3 billion, which is to say, 7.3% of our sales. We built 16 new plants and 3 R&D centers. We have now the capacity installed to fuel the future growth. As a consequence, our investment program will be at a maximum of 6% for 2021 and '22. First rule -- or third rule to generate free cash flow, you manage your working capital. As you can see here, the change in the working capital we have was an outflow of EUR 16 million in 2019. So the working capital requirement is managed, and takes into account a reduction of EUR 32 million of the receivable factored program we have in place. Fourth, we divest what is non-core for the company, so this is the nonindustrial real estate. And this divestment is a flow -- an inflow of EUR 129 million, leading to a significant free cash flow generation that we are very proud of, of EUR 347 million. We stated, from the EUR 129 million of real estate divestment, we generated the same free cash flow as last year. IFRS 16, again, an impact of EUR 271 million on our debt -- on our net debt, that stood at the end of December 2019 at EUR 739 million or EUR 511 million, excluding the IFRS 16 impact. It means that the real debt reduction in 2019 was EUR 187 million. All in all, and to conclude with the financial structure of Plastic Omnium today. We have an EBITDA of EUR 1.005 billion. A net debt of EUR 739 million, representing 32% of our equity or 0.7x our EBITDA. We have, therefore, a very sound financial structure that enables us to continue our innovation and growth strategy that Félicie Burelle is going to present to you now.

Thank you, Adeline. Good morning to everybody. So as a matter of fact, we are entering this year in the third year of consecutive decline on the market. But it's not because this is happening but the transformation of our industry is starting. And actually, it's quite lucrative because today, we see that the industry altogether has committed to EUR 900 billion of investment to be spent in the 10 years to come. So yes, it's a declining market. But the shift, the transformation is so strong, that a lot of investments are going to be poured in the years to come. And clearly, we believe we have a role to play, to enjoy the 4 mega trends that are pushing this transformation. So those 4 trends, which now you all know. So the connected, autonomous, shared and electrified megatrends. So if we take a step back and see what happened, where we stand on those 4 trends today. So connected is now the more matured aspect of the industry. It is something that all of you, all the consumers are expecting today in your car. Your car is more and more connected. Within the car, the car with its environment. And actually, the next step today is the autonomous car. The autonomous car, we know now take -- took some delays in terms of rollout, not only because of technology but because of the legal and the implication in terms of insurance and responsibility. So we know it will come but it will take more time. And we won't see, we believe, specific application of full autonomous level before 2030. So it will happen, but it will take more time. The shared aspect of the transformation clearly is taking momentum. We have seen a strong growth over the last 3 years. But it still remains a very trend -- very much focused on growth in the urban areas. We can't avoid. It will be clearly a growth factor. As we believe that by 2025, at least 10% of the revenues of the industry will come from those form of new revenues, new mobility. And finally, electrified. Clearly, there's not news every day without something on electrification. Clearly, it's -- there is a strong momentum. Most of the investments are now going through the electrification because of regulation, because of increased political pressure, notably in Europe. And today, we can see that it only accounts for 2% of volumes. But the most pushy forecast on electrification are 18% to 20% on the total market by 2030. So strong growth to come in the field of electrification. And clearly, for us, it has a strong impact because given the market situation, given the shift in technology and the transformation of the industry. We have shown you that during our Investor Day in early January, we are really moving from a growth based on market share to a growth of increasing content per car, as explained by Laurent Favre earlier. And how do we do that? You have here on this picture, a good representation on how we do that. You know us mostly for being leaders on our 3 activities, which are bumpers, fuel tanks and front-end modules. But as you can see on this picture, we are now growing our product portfolio and putting into the market new products. You have here a more specific focus on what happened last year. We talked about the cockpit module. We started our first cockpit contract in 2019 for the Porsche Taycan, so a pure electrical vehicle produced in -- assembled in Germany. And for you to really understand what it means in terms of complexity. On a piece like that, you have almost 300 components and a vehicle like the Taycan has 500 version. So this really illustrates the know-how and the complexity managed at HBPO, that we managed to shift from front-end module to cockpit modules. And we do the same on the center consoles with the Audi Q3 and Q5. And last but not least, regarding HBPO, we also started our first DC/DC converter, which enable to switch from high-voltage to low-voltage within the car. And thus, simplifying the electrical structure within the car. So those 3 products are a clear illustration of the shift from front-end module to other modules on HBPO side. As far as Intelligent Exterior Systems is concerned, you have the roof module. Here, again, it's a good representation on our capacity and innovation capabilities that we have on the bumper and on the tail gate, that we move to the roof of the car. Here, we show that we are capable of integrating more functions in terms of detection, but also to [ radar ] connectivity while using really the benefit of plastic, allowing for more different shapes and more aerodynamics. And last but not least, hydrogen. As we have communicated earlier in the year. So we won our first contract for a German OEM. And in terms of OEM, it's one of the kind, it's one of the biggest market that was sizable and available on the market. And also, we are the first to get the 700-bar homologation on pressurized tank. And you know, as each year, on this chart, but we communicated last week, on the first contract that we got on the water injection technology, which allows by injecting a bit of water in the tank to reduce CO2 and also to improve the efficiency of the engine. So here, clearly, a good representation of what PO is developing and producing internally, and how we can benefit and also that in light of the CASE megatrend. So we do that internally. But we also innovate and partner with other players in the industry. German ones, mainly, as you can see. So our first partnership with Hella, that actually was now -- it's the first anniversary of this partnership. We have our dedicated and shared team based in Berlin, in -- an incubator [ drived ] by Hella. And in there, our team came up with a proposal that clearly integrates more lighting and electronics in our plastic parts. We showed that -- displayed that at Frankfurt Motor Show earlier -- back in September. And we received good feedbacks. And we actually won the first predevelopment contract with a German OEM. And hopefully, this will lead to a first contract by 2021. Partnership with Brose. So this is another approach, product approach. We have the same kind of organization. It's a dedicated team from people from both sides, based in Nuremberg, only thinking and developing a new door concept that really, we believe, will answer to the need -- future needs of OEM in terms of new way of assembling the car as they need to do it differently and also onboarding new functionalities in the door. So detection, lightweight, communication. Here, again, we've showed a proof-of-concept in Frankfurt. And we are now in further discussions with OEMs to come up with more specific developments. So PO [indiscernible] is innovating internally with partners. And we also benefit from innovation from our investments in 2 venture capital. Aster, who was the first initiative 2 years ago. Today, we can -- we are happy with 7 investments that were made. But as you know, all this approach is not about investing in start-ups, but it's about identifying new technologies and how you can onboard that in your organization. And today, we are proud to have 3 ongoing development. So what we call POC, proof-of-concept, that will enable us to improve either on the product side, but also on the process and efficiency side. The next step will be how to scale up that internally. We launched this initiative in AP Ventures in September. This fund -- we co-invested together with other LPs like Anglo American or Toyota through one of the asset fund. Clearly, here the focus is on hydrogen, how to grow this ecosystem. How to embark, again, technology and see how this market is developing, shifting. Today, one investment made to date. So ERGOSUP, which is basically a new electro -- innovative way of supplying hydrogen remotely. It's the first of a long series of investments. And most important, here again, we are building this ecosystem. And it gives us the visibility and the possibility to really exchange with key people within this industry. So we are innovating internally with our partners and also through our new VP approach. And we really believe that thanks to that, we will be able to address the CASE megatrend and benefit from that. So I will leave it to Laurent Favre, who will come back on the CSR Strategy.

Thank you, Félicie. As I said at the beginning, our strategy is based on 3 main pillars. And the first one is operational excellence, cash management. The second one is about innovation, what Félicie did explain before. And another one is the CSR strategy, very ambitious one. It's not new for Plastic Omnium. It's something we have started many years ago. We have a lot of actions in place, and I will try to describe that later on in most of our factories. And that is the reason basically why -- when we do assess ourselves compared to our peers with independent institutes, and you'll see some numbers here, like RobecoSAM and EcoVadis. We have a very good ranking. I'll start with RobecoSAM. We had a ranking score of 67% last year, which is an increase compared to '17 and '18. But even more compared to the -- to our peers in the automotive industry, it's almost double this call we have because the average is 36%. Again, it shows that we have not only started some months ago, but many years ago, because we are in a very good position compared to the rest of the industry. RobecoSAM gave us the ranking of the #1 -- worldwide #8 sorry, in the automotive suppliers. Similarly, the EcoVadis, 72%. Again, an increase compared to '17, but also giving us a gold level, meaning that we are in the top 1% in the industry. And that means we want to continue to assess ourselves, to compare ourselves with our peers because that's the reality. Not only what we think, but what the reality of the peers is. And that's why we are doing this kind of assessment, and with the intention to further develop, to further improve and to be for sure best-in-class in terms of CSR. How do we organize our CSR strategy. Internally, the name is Act For All. Act For All because it's about everybody. It's about our employees. It's about our partners, but it's also about the global environment, about our impact on the planet. And that's why the word, Act For All. This initiative, which has been already launched. And we have organized it in these 3 pillars. You see the 3 pillars. You see some concrete activities, actions and KPIs we are following closely on a worldwide base, starting with responsible entrepreneurs, but also care for people, sustainable production. And I will go into the details of these pillars right now by giving you some examples of what we are doing, what we have achieved and what we want to achieve in the next years. But as you can see, it covers all the topics. What we mean being a responsible entrepreneur. That means starting with business ethics for us but also for our suppliers, our partner, to care for people. It's about safety. It's about economies, but it's also about talent, people management and diversity. And for sure, also sustainable production. That means being carbon neutral using renewable energies, having a strong waste management and so that is our CSR policy. That is our Act For All program internally. And now I will go into some details of what we are doing. I'll start with responsible entrepreneurs and 2 examples that we are doing and the target we have for the future. First of all, I said, it's also about our partners. Therefore, we do assess as well our suppliers. We have, what, 20,000 suppliers in the world. And we do assess them, how they do behave, and we have the target for sure to be at over 90% of responsible purchasing index in 2025, coming from 68% right now. That means that's about the way we want to select our partners. Regarding the Ethics Commitment Index. Internally, we are at about 89%, and the target is pretty easy. It's about 100% in 2025 and to be achieved much earlier as well. That means -- that's the part responsible entrepreneur. The second part is about caring for our people, with again, 2 examples. The first one is safety at work, where Plastic Omnium did improve dramatically in the last years. And also during 2018 and '19 period, an improvement of more than 30%, giving us today a benchmark position but it's not enough. And we are intending to further improve until 2025. You see the numbers here, they are pretty ambitious, pretty aggressive, but they are really stitch because we have a great momentum in our factories. Gender diversity. Also an improvement, still low numbers. But that's one of the issue in our industry. We are much better than our peers. And we compare to the automotive suppliers. In France, we have much higher numbers, twice better than the peers, but they are not enough. And we do intend to achieve 25% at least for women in management position. For your information, in the context of Plastic Omnium, we have to be at 27% already. But the journey is not finished, and we will further improve in this area as well. Coming to the sustainable production. Sustainable production is for sure, first of all, to reduce the energy consumption. That is the Top Planet Program we have in all of our factories or most of our factories. And you see here the numbers, the improvement and the target. That means it's about consuming less. And renewable energies, it's about consuming better, that we use in renewable energies in the factory. We have started. We have only 4 sites today being -- using 100% renewable energy out of 131. But we do target more than 50%, that means more than 66 sites in 2025. And that creates as well a great momentum in the team. But it will continue this year in 2020. What we have started before, we will continue as well to mobilize the complete team, starting with a complete management as we have done last year as well. And you can see a nice picture here, that -- what will be our journey as well. We will continue the actions we have started already. But we would have also some dedicated focus on two items, which are very important for us. It's working with our customers on a real carbon neutral strategy. When I mean real carbon neutral strategy, it's not only about what we produce, it's also about the logistics and the complete supply chain. And also working on using more recycling plastic in our products, what we are already starting but to more extent in the future. That means, again, we do cover all the important topics. We have done a lot. It's not enough. And that's part of our journey. And one of the main pillar of our strategy for Plastic Omnium in the future are CSR policy. Now talking about 2020. The outlook of 2020. I'm starting with the market. And I won't repeat what we have said before, that means that the market was declining in '18, in '19, close to 6%. And in 2020, when we did start the year, we have announced in our Investor Day in January that the market would decline again by 2% this year. That was our assumption. At this time, the market we're seeing that we were too conservative. But that is what we thought at this time. And in the meantime, for sure, there is a crisis due to the coronavirus in China, which is impacting the market, mainly in China, dramatically right now, and which will have an impact as well for the global market this year. I will come back later on to the coronavirus and to our presence in China. But what we do see today is that in China, we will probably lose round about 2 million vehicles in production in Q1, that is our understanding of the situation, 2 million vehicles in Q1. And that will lead to a decrease in the market in Q1 from at least 10%. That means minus 10%. That is what we will have to face in Q1. The first semester would be pretty weak in total because we do anticipate the first semester being at least by minus 5%. And then everything will be about how the market is able to recover in the second semester. It's too early today to say how it will develop. It will depend as well on the coronavirus situation. It would also depend on the market in Europe and on the way Europe will react to the new technologies, which are in place right now. When we come to the coronavirus and our situation in China. That's the footprint we have in China. We have 29 factories in China. We have 2 R&D centers, plus our headquarter in Asia. And in total, 5,500 employees. That is our footprint. And you see the economic sales, 9% of our turnover and 4% in consolidated sales. The first priority when the coronavirus crisis started was to protect our employees. We are very happy to see that no employee has been affected by the virus, which is very positive, for sure, for us. And now we are starting to produce or to restarting to produce in our factories in China. As of today, 17 plants have started to produce to a low capacity level. I think we are talking about 20%, 30%, 40%, 50% of the normal capacity because the people have to come back. Some of them are in quarantine, and the same for our customers. But we have started in 17 factories out of 29 already. We should start by 22 in our factories until the end of this week. And we have a pretty good perspective for all the factories, except the one in Hubei province, which is the one -- which is the most impacted by the coronavirus until end of next week. I think the uncertainty is mainly regarding the Hubei province, where we have 2 factories for IES and 1 factory for CES and a R&D center. The next challenge due to the coronavirus will be, for sure, also the supply chain because the complete supply chain has to be fulfilled again. And we are monitoring that very closely with our suppliers. We don't see any major risk right now for us in China. The global supply chain will, for sure, be a challenge for the complete industry. But in a nutshell as of today, what we do see is a loss of 2 million cars in China in Q1. The factory -- the production starting again, at a slow volume but starting again. Pretty good perspective to start, again, in one of our factories, except the one in Hubei in the next days. And then for sure, the challenge of the complete supply chain of the automotive market. That's about the situation in China. We are doing what we have done already last year. That means we are working on our costs. We are flexing our costs. We are adapting to the market situation. I said before, Q1 will be about minus 10% or even worse in the global market and minus 30% in China compared to last year. And H1 will be at least minus 5% compared to last year. And that is where -- the way we want also to size our structure and to adapt our costs, basically. That means, we hope there will be a recovery of the second half of the year. But we do consider today that we need to adapt to the current situation. That is very important. We are doing what we have done last year. That means we continue to flex in our factories. We continue to adapt our footprint. We have a dedicated program as well to our German footprints because as you know, the German production did lose 1 million cars in 2 years. That means we need to adapt to the situation, we will close a factory this year in [indiscernible] but we are working on further adaption of the -- of our German footprint. We are reinforcing also regional synergies between our divisions by country because we do see some potential as well here to become leaner and more efficient. And we have started a transformation program to streamline our processes to be more agile and to use more digitalization in our -- in all daily work. And these are new areas where we do believe we can also create some interesting savings. And for sure, beside that, we have some dedicated action regarding the cash management because cash is very important in the uncertain time we are facing, like for example, the inventory management, where we are very focused with the complete team to reduce to the minimum we need. That is what we are doing, again, with the current assumption of the market, with what we do see in the next months to be ready and to adapt as we have done in the past as well. Besides this, I would say, challenging situation in the market. We have also good news because we are starting -- we are launching 207 new products this year. It's a similar numbers as compared to 2019. You see the numbers. It's all over the world. It's showing, again, that we have a strong order book that we are very dynamic to support our customers in their new programs. And that is, for sure, an area of satisfaction and attention as well to make sure that those launches will be happening as we have done in the past, that means without any issue. But that shows as well, again, the growth potential we have for the future. Regarding the financial outlook. We do intend and we will outperform the market by 5 points this year. That means, again, Plastic Omnium will be able to be much better than the market regarding the top line. We will also increase our margin, operating result and EBITDA in value compared to 2019. And we will generate more than EUR 200 million free cash flow, again, in 2020. We will cap the invest at 6%, but we will not compromise on innovation. That means innovation is key for us. We have enough capacity in our factories. We don't need to invest furthermore in capacity. But we will continue to invest massively on innovation because it's the key for our future growth and future success. That means outperformance 5 points. The result will increase in value, and we will be able to generate more than EUR 200 million free cash flow by investing in innovation, in the topics Félicie did present before. Regarding the dividend. We propose to keep the same amount, that is EUR 0.74 per share, which is a huge increase in terms of payout because -- I think about 42%, and PO is used to be -- between 20% and 25%. And that means that is what we are going to propose in the shareholders' meeting in April. It's not a new standard, but we had a good year into '19. We are able to generate a high level of cash flow. We want our shareholders to benefit out of that. And that's the reason we will propose to keep the same value in absolute values, EUR 0.74 per share for the year of 2019. I'm finished with the presentation. I'll try to summarize. A very good solid results in 2019, strong growth, strong cash generation, highest EBITDA ever and strong outperformance of the market for 2020. Even if the market is still very challenging, we want to continue on the same pace to outperform the market, to increase our profits in value and to be able to generate more than EUR 200 million free cash flow by investing as well without reduction in innovation. Thank you. I will go now to the Q&A session.

[indiscernible] from Kepler Cheuvreux. I have 2 questions, please. The first one regards the expected outperformance. Could you please give us some color on the expected outperformance degree by region? So should we expect the same regions to drive the outperformance i.e. China and North America? And also please comment on the divisions, i.e. Plastic Omnium Modules versus Industries? And the second question is about the profitability profile sequentially, as you mentioned, H1 is expected to be very challenging and H2 a bit better. How should we think about your margins sequentially? Do you expect to improve margins already in Q1, i.e., fully offset the negative operating leverage with cost savings? Or should we expect the improvement to be more back-end loaded?

I will hand over to Rodolphe Lapillonne, our CFO for the first question and come back later to that. Rodolphe?

So regarding the coming period. We will continue to outperform the market. Mainly in all regions as we did. Our fundamentals for this year are being exactly the same as the fundamentals for last year. And you can see, given the number of launches, which have been displayed to you for this year that, in fact, our growth in spite of a declining market come from the new vehicles we are on, and of course, increased content per car on these new vehicles. So basically, no big change.

If I can add something, we will also enjoy a nice outperformance in Europe in 2020, especially in HBPO, we talked about the new modules. We are launching in HBPO, the center console, the cockpit module, I am inviting you at the end of the meeting to see it. We have it here in -- exposed. So again, Europe will be also a contributor to the outperformance of Plastic Omnium in 2020.

Regarding the margins pick between the first semester and the second semester. I mean for sure, in Q1, we will have a negative impact because of the situation of the coronavirus. I said before, we will lose 2 million vehicles in China in Q1. And even if -- even if we are doing everything we can do to flex, in China, it's not possible to flex today because we don't want and we cannot lay out -- lay off people. And therefore, we need to adapt. That will have an impact. We are trying to offset that as much as possible in the other areas, but to offset completely won't be possible in Q1. We do expect the position to recover later this year in China. That means also to compensate later this year with higher volumes. And that's why the results will be better in H2 than in H1.

Since Tesla is the new -- it's the new darling in the business. What kind of products you sent to Tesla?

So today, we provide front-end modules. So HBPO is supplying Tesla. Maybe Martin, if you can comment?

So it's basically [indiscernible] we supply 300,000 cars to Tesla, that's Model 3 and Model Y. With a reduced amount of sales per module, but it is EUR 30 million, EUR 40 million in sales, increasing with new products like [ wheel shutters ].

Martin or Laurent, did you feel more pressure on prices from your customers since the market is not so good? And how do you cope with that? And do you see pressure with your suppliers?

You can imagine that if there is a market with overcapacity. Overcapacity means always a cost pressure. That means there is a huge cost pressure from the market, from the consumer market, from the OEMs to us, but also with our suppliers. But I would say that's a normal way of working in the automotive industry, anyway. Therefore, there is nothing new on that. We do adapt. And we want to differentiate by bringing also innovation and more technology to our customers. That means -- our way to act is not -- not to compete only on cost, it's to bring more technology, more service to our customers.